Question 1

Jewelry manufacturers produce a range of products such as rings,necklaces,bracelets,and brooches.What fundamental economic question are they addressing by offering this range of items?
A) How to produce goods that consumers want?
B) Why produce a variety of items?
C) What to produce?
D) Who to produce the items for?

Accepted Answer

By offering a range of products such as rings, necklaces, bracelets, and brooches, jewelry manufacturers are addressing the fundamental economic question of "what to produce?" They are deciding on the mix of products to offer in order to meet consumer demand and maximize profits.

Question 2

Productive efficiency is achieved when
A) firms add a low profit margin to the goods and services they produce.
B) firms produce the goods and services that consumers value most.
C) firms produce goods and services at the lowest cost.
D) there are no shortages or surpluses in the market.

Accepted Answer

Productive efficiency is achieved when firms produce goods and services at the lowest cost. This means that resources are being used efficiently and there are no wasted resources, resulting in lower costs of production. This allows firms to offer lower prices to consumers while still making a profit.

Question 3

Which of the following statements is true about competition in a market?
A) Competition forces firms to outsource the production of their labor-intensive products.
B) Competition forces firms to undercut their selling price, thus benefiting consumers who will be able to purchase products at the lowest price possible.
C) Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production.
D) Competition forces firms to add only low profit margins to their costs of production.

Accepted Answer

Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production. This is because if the marginal cost is higher than the marginal benefit, the firm will not be able to earn a profit and remain competitive. Therefore, firms must continually evaluate their production and pricing strategies to ensure they are meeting consumer demand and staying competitive in the market. Choices A, B, and D are not necessarily true in all market situations.

Question 4

Which of the following is a result of a market economy?
A) environmental protection
B) an equal income distribution
C) agreement on equity
D) voluntary exchange

Accepted Answer

A market economy is based on voluntary exchange, meaning that individuals and businesses engage in transactions based on their own self-interest. This leads to the production of goods and services that are in demand by consumers, resulting in a more efficient allocation of resources. However, this does not necessarily lead to environmental protection or an equal income distribution, as these factors are not considered in the pursuit of profit. Agreement on equity is also not guaranteed in a market economy.

Question 5

When production reflects consumer preferences,________ occurs.
A) allocative efficiency
B) productive efficiency
C) equity
D) efficient central planning

Accepted Answer

Allocative efficiency occurs when resources are allocated in a way that reflects consumer preferences. This means that the production of goods and services is focused on what consumers want, which results in the efficient use of resources and the maximization of consumer satisfaction.

Question 6

Which of the following correctly describes the relationship between economic efficiency and economic equity?
A) They are both automatically achieved in a free market economy.
B) They always call for opposite outcomes.
C) There is no conflict between the two goals.
D) There is often a trade-off between the two.

Accepted Answer

Economic efficiency and economic equity often have conflicting goals, leading to a trade-off between the two. Economic efficiency is focused on maximizing output and productivity, often at the expense of more equitable distribution of resources. Economic equity, on the other hand, aims for fairness and equal distribution of resources, which can come at the cost of economic efficiency. Therefore, there is often a need to balance the two goals in economic policy-making.

Question 7

Which of the following generates productive efficiency?
A) competition among sellers
B) competition among buyers
C) government inspectors
D) government production rules and regulations

Accepted Answer

Competition among sellers forces them to produce goods at their lowest possible cost, which generates productive efficiency. Choice B, competition among buyers, may generate allocative efficiency by ensuring that goods are produced at the right price, but it does not necessarily lead to productive efficiency. Choices C and D, government inspectors and production rules and regulations, may improve safety and quality standards, but they do not necessarily lead to productive efficiency.

Question 8

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum.What is the opportunity cost of his decision?
A) 0 since he will no longer be earning a salary
B) depends on the "going rate" of museum employees
C) at least $80,000
D) the value he attributes to the joy of working at a museum

Accepted Answer

The opportunity cost refers to the value of the next best alternative given up in order to pursue a certain action. In this case, Trinh gave up his $80,000-a-year job to become a full-time volunteer at a museum, which means he gave up the opportunity to earn that amount of money. Therefore, the opportunity cost of his decision is at least $80,000.

Question 9

Markets promote
A) equity and competition.
B) voluntary exchange and equality.
C) equity and equality.
D) competition and voluntary exchange.

Accepted Answer

Markets promote competition, as individuals and firms strive to offer better products and services at lower prices than their competitors. They also promote voluntary exchange, as buyers and sellers freely enter into transactions based on their own self-interest. While markets may not necessarily promote equity or equality, they are still a powerful force for promoting economic growth and improving overall living standards.

Question 10

Which of the following is an example of an efficiency-equity trade-off faced by economic agents?
A) According to an article by in the American Journal of Public Health by Edward Kaplan and Michael Merson of Yale University School of Medicine, the federal government's current method of allocating HIV-prevention resources is not cost-effective. Instead of allocating resources to states in proportion to reported AIDS cases, resources should flow first to those activities that prevent more infections per dollar and then to less and less effective combinations of programs and populations until funds are exhausted, even if it means that some populations would be left without any prevention services.
B) Concerned about the falling birth rate, the French government has pledged more money for families with three children, in an effort to encourage working women to have more babies.
C) Some U.S. colleges are actively recruiting foreign students for their technology-based programs.
D) All New York City art museums are considering adopting a free-admission policy for local residents one weekend per month.

Accepted Answer

The allocation of resources to prevent HIV transmission requires a trade-off between efficiency (preventing more infections per dollar) and equity (ensuring access to prevention services for all populations). The proposed method prioritizes efficiency over equity, potentially leaving some populations without prevention services. Choices B, C, and D do not involve a clear efficiency-equity trade-off.

Question 11

Which of the following is motivated by an efficiency concern?
A) In December 2006, the Bush administration restarted a short-term housing assistance program for victims of Hurricane Katrina.
B) Each year, the University of Notre Dame conducts a lottery to parcel out the 30,000 seats available to contributors, former athletes and parents in the 80,000-seat stadium.
C) The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs.
D) The federal government's housing choice voucher program assists very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market.

Accepted Answer

The United Network for Organ Sharing advocates for a system that prioritizes certain recipients over others in order to optimize the allocation of scarce resources. This is motivated by an efficiency concern, as it seeks to maximize the use of available organs by giving them to those who are most likely to benefit from them.

Question 12

Voluntary exchange between buyers and sellers generates ________ in a market economy.
A) scarcity
B) allocative efficiency
C) productive efficiency
D) equity

Accepted Answer

Voluntary exchange allows markets to allocate goods and services to those who value them the most, leading to allocative efficiency - the allocation of resources that maximizes consumer satisfaction.

Question 13

Allocative efficiency is achieved when firms produce goods and services
A) at the lowest possible cost.
B) that consumers value most.
C) at the lowest opportunity cost.
D) at a marginal cost of zero.

Accepted Answer

Allocative efficiency is achieved when firms produce goods and services that consumers value most. This means that resources are being allocated towards the production of goods and services that provide the highest level of satisfaction to consumers. Allocative efficiency is not necessarily about producing goods and services at the lowest possible cost, lowest opportunity cost, or at a marginal cost of zero, although these factors can contribute to overall efficiency.

Question 14

Which of the following is motivated by an equity concern?
A) Some states have transferred funds to food bank programs in order to increase benefits to lower-income families.
B) Following the implementation of subsidies for energy conservation, household demand for rooftop solar panels increased quite significantly in California.
C) The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs.
D) The United States offers patent protection to pharmaceutical manufacturers to prevent others from duplicating their products.

Accepted Answer

Transferring funds to food bank programs in order to increase benefits to lower-income families is motivated by an equity concern. This action seeks to provide more resources to those who are socioeconomically disadvantaged, in order to promote a more just and fair society. The other options do not directly involve equity concerns.

Question 15

Trina's Tropical Fish Store sells goldfish for $2 each and angelfish for $10 each.What is the opportunity cost of buying a goldfish?
A) 5 angelfish
B) 1/5 of an angelfish
C) $10
D) $2

Accepted Answer

The answer of Trina's Tropical Fish Store sells goldfish for...

Question 16

Political candidates often hold fund raisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Is this transaction economically efficient?
A) No, political candidates should never be allowed to overcharge for a fund raising dinner.
B) Yes, it was a voluntary exchange that benefited both parties.
C) No, Wendy paid too much for four dinners.
D) Yes, it is efficient only from the perspective of the candidate but not from the perspective of Wendy.

Accepted Answer

The transaction is economically efficient because it was a voluntary exchange that benefited both parties. Wendy chose to purchase the tickets at that price, indicating that she valued attending the dinner enough to pay $4,000 for it. The candidate also benefited by raising funds for their campaign. The fact that Wendy purchased four tickets suggests that she had the means and willingness to spend that amount on the dinner, making it an economically efficient transaction.

Question 17

________ is a situation in which a good or service is produced at the lowest possible cost.
A) Allocative efficiency
B) Productive efficiency
C) Equity
D) Optimal marginalism

Accepted Answer

Productive efficiency refers to the situation in which a good or service is produced at the lowest possible cost. This means that resources are being utilized in the most efficient way, and there is no way to produce more of the good or service without increasing the use of resources, which would lead to higher costs. Allocative efficiency refers to the situation in which resources are allocated in such a way that the marginal benefit of the good or service is equal to the marginal cost, while equity refers to the idea of fairness and justice in the distribution of resources and income. Optimal marginalism is not a commonly used term in economics.

Question 18

In economics,the term "equity" means
A) everyone has an equal standard of living.
B) the hardest working individuals consume all they want.
C) only elected officials have high standards of living.
D) economic benefits are distributed fairly.

Accepted Answer

Equity in economics means that economic benefits are distributed fairly. This could refer to the fair distribution of income, resources, and opportunities among individuals and groups. It does not mean that everyone has an equal standard of living or that the hardest working individuals consume all they want. It also does not imply that only elected officials have high standards of living.

Question 19

________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.
A) Competition
B) Voluntary exchange
C) Equity
D) A centrally planned economy

Accepted Answer

Competition is the process of market forces exerting pressure on firms to improve their products, reduce their costs, and offer more attractive prices to consumers. In a competitive market, firms that cannot efficiently produce goods and services at the lowest cost are driven out of the market. This leads to firms producing as efficiently as possible and consumers receiving the maximum utility from their purchases. Therefore, competition increases economic efficiency by forcing firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.

Question 20

Allocative efficiency best explains ________,and productive efficiency best explains ________.
A) how something will be produced; when something will be produced
B) when something will be produced; why something will be produced
C) why something will be produced; what will be produced
D) what will be produced; how something will be produced

Accepted Answer

The answer of Allocative efficiency best explains ________,and productive efficiency...

Quiz 1: Economics: Foundations and Models

Jewelry manufacturers produce a range of products such as rings,necklaces,bracelets,and brooches.What fundamental economic question are they addressing by offering this range of items?

Productive efficiency is achieved when

Which of the following statements is true about competition in a market?

Which of the following is a result of a market economy?

When production reflects consumer preferences,________ occurs.

Which of the following correctly describes the relationship between economic efficiency and economic equity?

Which of the following generates productive efficiency?

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum.What is the opportunity cost of his decision?

Markets promote

Which of the following is an example of an efficiency-equity trade-off faced by economic agents?

Which of the following is motivated by an efficiency concern?

Voluntary exchange between buyers and sellers generates ________ in a market economy.

Allocative efficiency is achieved when firms produce goods and services

Which of the following is motivated by an equity concern?

Trina's Tropical Fish Store sells goldfish for $2 each and angelfish for $10 each.What is the opportunity cost of buying a goldfish?

Political candidates often hold fund raisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Is this transaction economically efficient?

________ is a situation in which a good or service is produced at the lowest possible cost.

In economics,the term "equity" means

________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.

Allocative efficiency best explains ,and productive efficiency best explains .